Goodbye to primary market frontloading. The window for issuance before the start of the QT has closed. And therefore the pressure in some segments, such as covered bonds (+43% YTD, €70mm), is expected to ease. And although the ECB has made it clear that it will continue to participate in the primary green issuance after the start of QT, the utilities sector is the other sector that has advanced its needs the most with €27 billion issued, in the best start of the year, far exceeding the previous record of 2021 YTD of €17 billion.
All in all, the first phase of the ECB’s March-June passive QT programme that effectively started yesterday (T+2, €15mm/month of APP maturities that will not be reinvested) should not make a material change in a liquidity environment still rich and with primary demand even rising to 2.6x b/c last week (2x the previous week) in a difficult week for markets.
